Nigeria’s beleaguered foreign reserves seems to be gradually regaining its upswing as it rose by $1.030 billion in the last one month to close at $38.136 billion at the weekend. This represents a growth by 2.8%, compared to the $37.106 billion it stood as at June 10, 2014. Most analysts attributed the development to the appreciation of crude oil prices in the international market. In addition, some noted that the moderate demand for the US dollar observed at the central bank’s regulated Retail Dutch Auction System (RDAS) was also influencing the gradual buildup of the reserves. Data gathered from the central bank showed that the current value of the reserves which is mostly derived from crude oil earnings is the highest in the last two months. (Source: Thisday)
Despite declining system liquidity following Wednesday RDAS and PMA outflows (NGN114 billion), NIBOR declined an average of 13bps across all maturities, with the Overnight rate down a marginal 2bps to 10.61%.
Fixed Income Market...
Amidst tight system liquidity, traders remained on the sidelines in the T-bills market.
Similarly, trading in the bond market was lukewarm with no significant yield movement across maturities. At the monthly bond auction scheduled to hold on Wednesday 16th June, the Debt Management Office (DMO) would be offering NGN100 billion across the 3-year (re-opening), 10-year (re-opening) and 20-year (new issue) bonds. We expect rates to be pegged around last auction levels (11.3599% and 12.249% respectively) considering current secondary market yields of 11.43% and 12.19%. However, with the introduction of the new FGN JUL 2034 (NGN35 billion) instrument, we anticipate the supply boost would support relatively higher yields than prevailing market rates.
The Nigerian Interbank FX Market...
In the absence of strong demand as well as lingering dollar liquidity, the Naira at the interbank market traded flat to close at NGN162.30, its previous level.
Nigerian Stock Market Report ...
Trading on the floor of the Nigerian Stock Exchange closed on a negative note on Friday as the NSE All Share Index lost 0.40% to close at 42,832.82 points from 43,004.38 on Thursday. The Market Capitalization also dropped NGN14.143 trillion from NGN14.199 trillion on Thursday.
European Central Bank (ECB) President Mario Draghi’s newest stimulus tool will hand banks more than €700 billion of cheap funding. The ECB President’s targeted lending program for banks will boost credit for the real economy as planned, and as the same time help keep the financial system flush with cash. Draghi may address the topic on Monday July 14th when he testifies at the European Parliament in Strasbourg for the first time since elections in May.
Global Currency Update
The dollar found its footing after Thursday’s nose dive against the yen and the British pound. The dollar rose to ¥101.35 from ¥101.30 late Thursday. The dollar remained flat against the euro at $1.3607 from $1.3603 late Thursday, after rating agency Standard and Poor’s affirmed Germany’s ‘AAA’ sovereign credit ratings. The British pound fell to $1.7106 from $1.7130.
Crude plunged by more than $2 per barrel on Friday, heading for a third straight weekly loss as investors continued to unwind positions that had priced in the possibility of major supply disruptions stemming from violence in Iraq and Libya.
Gold dipped from 3-1/2 month highs on Friday as stock markets recovered from a selloff on concerns over the health of Portugal’s biggest bank, but the metal still marked a sixth week of gains.
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